Once Again: Feinstein/Coburn Amendment half-baked without DeMint Fix
Americans for Tax Reform has always opposed the ethanol mandate, tax credit, and import tariff.
Today Senators will have an opportunity to chip away at the ethanol industrial policy. Senators Coburn and Feinstein have offered Amendment #476 which would repeal the ethanol tax credit—a tax increase of $2.5 billion—and the ethanol import tariff. While these policies interfere with the free market, they do little to prop-up ethanol consumption.
To fully eliminate the ethanol regime, Senator DeMint has proposed Amendment #460 which would eliminate the real policy forcing Americans to use ethanol—the Soviet style Renewable Fuel Standard (ethanol mandate)—and repeal the death tax. Together, Amendment #476 and Amendment #460 completely abolish the ethanol industrial policy. The tax cut contained within the DeMint amendment is substantially larger than the $2.5 billion tax increase contained within the Coburn/Feinstein amendment. Thus,
Taxpayer Protection Pledge signers should feel free to support the Coburn amendment provided they also vote for the DeMint amendment. Taken together, this elimination of favoritism toward ethanol is not a violation of the Taxpayer Protection Pledge.
Senators have been afforded this opportunity to clarify their position on taxes and American ethanol policy. Senators who wish to raise taxes and nibble at the edges of the ethanol regime can vote only for the Coburn/Feinstein amendment. Senators who wish to cut taxes and totally eliminate the ethanol industrial policy can vote for the Coburn/Feinstein amendment as well as the DeMint amendment.
Click here for a PDF copy of this document.
Did Senators Break Their Tax Pledge This Week?
15 June 2011
I wanted to clearly state the Taxpayer Protection Pledge implications of yesterday’s cloture vote on SA 436.
Senators who voted for cloture on SA 436 did not vote for a tax increase. Nor did they violate the Taxpayer Protection Pledge which reads:
I pledge to the taxpayers of the state of _____and to the American people that I will:
ONE, oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and
TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.
Americans for Tax Reform made this crystal clear in its public statement of Friday, June 10 when ATR recommended that those Pledge takers opposed to ethanol mandates and preferences should vote for cloture and vote for the Coburn Amendment and for the DeMint Amendment. The vote for cloture failed and Senators did not have the opportunity to vote for or against Coburn and/or DeMint.
According to the Republican staff of the Senate Budget Committee, the Coburn amendment is a net tax increase of $2.4 billion. Because of this, a vote for the Coburn amendment alone would violate the Taxpayer Protection Pledge.
The Taxpayer movement repeatedly asked Senator Coburn to make this amendment consistent with the Taxpayer Protection Pledge signed by 233 members of the US House and 41 US Senators. He refused to do so and actually wished to make his amendment a tax increase to provide the government with more money to spend.
In recent months, ATR has been in contact with taxpayer advocate and ethanol preference opponent Senator Jim DeMint. Senator DeMint expressed an interest in offering an amendment which would end the ethanol mandate (something the Coburn amendment fails to do), and would provide a tax cut offset—death tax repeal—that was a tax cut significantly larger than Coburn’s tax increase. Due to the manner in which the Coburn amendment was brought up for consideration, Senate rules prohibited the DeMint amendment from being offered as a second degree to the Coburn amendment. As a result, Senator DeMint offered his amendment as a standalone measure to the underlying bill.
ATR was assured by Republican leadership that should cloture on SA 436 receive 60 votes, a vote on DeMint—or at minimum a procedural vote to allow a vote on DeMint—would immediately follow the vote on the Coburn amendment.
As a result, ATR informed Pledge signers that voting for cloture (and subsequently voting for the Coburn amendment) would be consistent with the Taxpayer Protection Pledge, provided that the Pledge signer also voted for the DeMint amendment later in the process.
Any Senator could now make his or her positions on tax increases and ethanol industrial policy clear. One could vote for ending ethanol industrial policy and for lower taxes by voting for both Coburn and DeMint. Or, one could vote to maintain the ethanol industrial policy (the mandate) and raise taxes on mandated ethanol use and support high death taxes by voting for Coburn and against DeMint.
Coburn refused to write his amendment to end the ethanol mandate and he refused to include offsetting tax reductions. As such, advocates of lower taxes and opponents of industrial policy had to write their legislation around his flawed amendment.
While this scenario is unusual at the federal level, it is very common in state level considerations of tax legislation.
The Senate was forced into this Rube Goldberg set of votes by Senator Coburn’s twin objectives: tricking Republicans into voting for a tax hike and preserving the impetus for American ethanol consumption, the mandate.
Senator Coburn said on the floor of the Senate this Monday that he supports ethanol and supports the government mandate forcing Americans to purchase ethanol. Senator Coburn said today that his true intention was to get Republicans used to voting for net tax hikes.
Senator Coburn failed. He was not able to get Republicans to vote for a tax increase. The procedural vote to move forward to the Coburn and DeMint amendments was only a vote for a tax hike in Senator Coburn’s mind.
Republican leadership in the House and Senate have clearly stated their opposition to any net tax hike now or in the future.
This letter should clear up any misunderstandings created by those hoping to use this rigmarole to push for tax increases.
Grover G. Norquist
The Problem with Ethanol is the Mandate
After a decade of experimenting with mandates, tax credits and tariffs, a national consensus has been reached that ethanol is just not worth it. Late to arrive at this conclusion are farmers, their Congressional representatives, and presidential candidates eager to win over primary voters—a coalition that has made it nearly impossible to begin unwinding the various policies designed to prop-up ethanol.
The driving force behind U.S. ethanol consumption is the Renewable Fuel Standard (RFS), otherwise known as the ethanol mandate, which was established with the enactment of the Energy Policy Act of 2005.The RFS mandated that a minimum of 4 billion gallons of renewable fuels be used in 2006 and that Americans consume at least 7.5 billion gallons by 2012. Two years later, in the midst of the 2008 campaign cycle, Congress passed the Energy Independence and Security Act of 2007 greatly expanding the RFS mandate. Americans now must consume 36 billion gallons of “renewable fuels” annually by 2022—15 billion gallons of which will be corn ethanol.
This is bad for American consumers. Implicit in the ethanol mandate is the reality that without such a policy, Americans would not use nearly as much ethanol—and for good reason. During most of the past 30 years, ethanol has been more expensive than regular gasoline. Furthermore, ethanol contains one-third less energy than gasoline. This means that if you put one gallon of gasoline in your car and one gallon of ethanol in your friend’s identical model, you’ll go 15 percent farther than your friend. Responding to an increase in the RFS mandate, some automakers are even installing larger gas tanks in vehicles.
If ethanol is more expensive and less efficient, it is easy to see why the fuel necessitates a mandate but hard to understand Congress’s justification for doing so. Unable to stand on economic grounds, ethanol proponents make claims about reductions in foreign oil and greenhouse emissions. Upon closer scrutiny, these defenses of ethanol also fall apart. A seminal study by Princeton University’s Tim Searching and several co-authors found that corn based ethanol nearly doubles greenhouse emissions over 30 years. While burning corn ethanol may produce fewer carbon emissions, growing, harvesting, and refining corn ethanol is a carbon intensive process.
Supplementing the ethanol mandate is a tax credit and tariff on ethanol imports. Since the early 1980s, various tax credits have been available to ethanol refiners and import tariffs have been imposed on foreign ethanol (particularly Brazilian sugarcane). However, it was not until the RFS was enacted that ethanol became ubiquitous.
It is clear that ethanol has few merits to those not growing corn or using the issue to woo Iowa voters. As such, the tax credit, mandate, and tariff should all be eliminated. In order to eliminate the tax credit without giving Washington’s appropriators more money to spend, any ethanol tax credit repeal bill should be offset with an accompanying tax cut—the bill should be at least revenue neutral. Elimination of the tariff should be unconditional and done immediately.
Getting rid of the RFS mandate, the impetus behind ethanol consumption, is a much heavier lift. In pursuit of this goal, Senator Inhofe (R-Okla) and Representative Issa (R-Calif.) have introduced the Fuel Feedstock Freedom Act, legislation that would allow states to opt-out of the corn-based ethanol RFS program. The Fuel Feedstock Freedom Act allows for statehouses to pass legislation that withdraws the state from the corn ethanol portion of the RFS, assuming the governor ratifies this bill. Simple and clear, the Fuel Feedstock Freedom Act has the opportunity to garner broad, bipartisan support.
For too long Republicans have hid behind opposition to the ethanol tax credit while quietly supporting the ethanol mandate. The Fuel Feedstock Freedom Act—or more plainly, opposition to the RFS—should be the litmus test for real conservatives. It’s time for conservatives to make ethanol a thing of the past, just like they did Democrats’ huge majorities in 2010.
Senate Denied Choice on Ethanol
Today the US Senate failed to invoke cloture on S. 782. This represents a lost opportunity for the Senate to vote on killing the government’s unfair myriad of ethanol preferences. Had cloture prevailed, through a series of amendments, the Senate could have voted to rip out ethanol, root and branch, from the federal government. Amendments offered by Senators DeMint, Thune, and Coburn, would collectively have ended the Renewable Fuel Standard (ethanol mandate), tax credit, and import tariff.
ATR alerted Taxpayer Protection Pledge signers that voting for ethanol tax credit repeal—which is a $6 billion tax increase—is consistent with their pledged commitment to their constituents provided they also supported a tax cut offset—such as the death tax repeal contained in the DeMint amendment.
There is a consensus conservative position that the government’s support for ethanol needs to end. Unfortunately, this view is not shared by Sen. Tom Coburn (R-Okla). On the Senate floor last night Sen. Coburn said the following: “I support ethanol…I support a mandated level of ethanol.” ATR and the overwhelmingly majority of the conservative movement support full repeal of the ethanol mandate, ethanol tariff, and the ethanol tax credit.
ATR looks forward to working with conservative allies on and off Capitol Hill to fully repeal the government’s buttressing of the ethanol industry.
Coburn: "I Support Ethanol"
Perhaps tipping his hand too early, Senator Coburn announced on the Senate floor that he, in fact, supports ethanol and has no intention of getting rid of the Renewable Fuel Standard (ethanol mandate). So why would Sen. Coburn force a vote on his legislation to repeal the ethanol tax credit and tariff? Because he knows his amendment will do little to depress ethanol consumption but will put Republicans in the awkward position of voting for a tax increase. Sen. Coburn hopes his tiny ethanol tax increase works like a gateway drug and will make larger, more dangerous tax increases—the kind he has consistently supported—more palatable for Republicans.
Pledge signers are free to vote for Coburn’s amendment as long as they also vote for Sen. Demint’s Amendment.
Coburn and Thune on the floor:
THUNE: “One of our colleagues from South Carolina has introduced an amendment to this bill which would end that, and I assume -- I don't know this for a fact -- that my colleague from Oklahoma would support that amendment. Which would do away with the Renewable Fuel Standard. Certainly.”
COBURN: “You obviously didn't hear what I was saying as you were conversing. I said I support ethanol. I wouldn't support that. And I said that. And I’ve been very up front with you in the past. You know what my position is on that.
So the question is -- and I would ask him this question -- how do you fit what the people who get this $3 billion that you say it is going to have a negative impact -- the very people who get the $3 billion who say they don't want it -- why would they say that if it's going to have a negative impact on their industry?”
THUNE: “I would say to my colleague from Oklahoma I was not aware that he supports the RFS. If there is an amendment to strike the RFS offered – which there will be, and my colleague from Oklahoma, if I’m wrong in saying that – that you would oppose that amendment to strike the RFS?”
COBURN: “I will oppose that amendment but my worry is because of the process of the Senate, we may not get that amendment to vote on. And I think my colleague as part of the leadership on our side would recognize that we have a problem with amendments.”
THUNE: “I don’t disagree with that. I think there’s an issue here with amendments, and I would say that this, and I’m not arguing, it’s your prerogative to bring this up, it’s your prerogative to file cloture which you’ve done in this circumstance. But I think that the Renewable Fuel Standard, which creates the policy construct that we’re talking about here today, is one aspect of the biofuels policy going forward.”
(View the clip here on CSPAN)
Coburn Amendment half-baked without DeMint Fix
Americans for Tax Reform today reiterated its support for full, tax revenue neutral repeal of all government granted advantages and preferences to the ethanol industry. To this end, ATR is pleased to support Senator Jim DeMint’s amendment which repeals the Renewable Fuel Standard (ethanol mandate) and kills the death tax. This amendment fills in the gaps left by Senator Tom Coburn’s ethanol amendment and overwhelms the Coburn tax increase with a more significant tax reduction. The Coburn amendment repeals the ethanol tax credit and tariff but in a way that raises net taxes and grows government spending. The DeMint amendment abolishes the death tax which is a significantly larger tax cut than the Coburn amendment’s $6 billion tax increase.
The DeMint amendment also cuts to the heart of the government’s support for ethanol by repealing the mandate that requires American families to purchase ethanol at the gas pump.
Taxpayer Protection Pledge signers should feel free to support the Coburn amendment provided they also vote for the DeMint amendment
The government’s mandate of ethanol usage distorts energy markets and raises prices for consumers. In order to fully repeal the government’s unfair, anti-free market support of ethanol, all three policies must be eliminated—the mandate, the tax credit, and the tariff. Only the combination of the Coburn and DeMint amendments completely kills the government’s support of the ethanol regime.
The DeMint amendment which abolishes the death tax insures that repealing the ethanol tax credit is done in a way that prevents additional money from flowing to the appropriations committees. ATR has always opposed all forms of government support of ethanol. Our goal has been to repeal the ethanol tax credit, tariffs and the mandate totally…without raising taxes. The Coburn amendment, combined with the DeMint Amendment, accomplishes this longstanding goal.
This is why conservatives are fighting for for-profit colleges
ATR opposes all federal education loans. If we had it our way these programs wouldn’t exist at all. ATR has and will continue to advocate for a reduction and elimination of federal education loans. The Department of Education estimates that in 2011 they will authorize direct loans totaling $116 billion. If that wasn’t bad enough, the government, via the Federal Family Education Loan program, backs loans issued with private capital. According to the Congressional Review Service, there are approximately $450 billion in FFEL loans outstanding and due to be repaid in the coming years. These programs, undeniably, need to be scaled back and eventually eliminated.
However, these programs do exist. The gainful employment rule that ATR opposes does nothing to reduce the amount of money the government spends on education or education loans. The misconception that once students will no longer be able to receive federal loans to attend certain for-profit institutions, the government will use the money to pay down the debt or give Americans a tax cut is wishful thinking.
When has a federal agency not spent money appropriators already allocated to it?
What the gainful employment rule does is further skew an already skewed market, America’s higher education sector. ATR believes that every college—private, public, or for-profit—should be able to compete for students that receive federal loans. The gainful employment rule creates obstacles for certain colleges to jump over but not others—this is what ATR finds problematic.
ATR’s requested Securities and Exchange Commission (SEC) investigation about the gainful employment rulemaking process is an entirely different issue. Thanks to diligent investigative work from the Citizens for Responsibility and Ethics in Washington (CREW), there are warranted concerns that hedge fund managers’ manipulated for-profit schools’ stocks in order to short sell them. In addition to CREW, Senators Enzi (R-Wyo), Burr (R-N.C.) and Coburn (R-Okla.) have also called for SEC investigations.
It is unfortunate that these federal spending programs exist. ATR also bemoans the existence of public schools, teachers unions, and Obamacare—but that doesn’t mean we won’t work to mitigate the negative effects of these bad policies or institutions.
Secretary Duncan Misses Opportunity to Answer Gainful Employment Concerns
Not even trying to hide the partisan intent of the Health Education Labor and Pension (HELP) under Sen. Harkin’s leadership, today’s committee hearing was titled Drowning in Debt: Financial Outcomes of Students at For Profit Colleges. This is not the first time Sen. Harkin (D-Iowa) has convened the HELP committee to help grind his axe with for-profit colleges, and will likely not be the last. Given the intent and witness list for today’s hearing it is not surprising that Senate Republicans did not show up. What would have been the point?
The seemingly endless hearings and subsequent fuss is over the Department of Education’s (DOE) gainful employment regulation. In short, the DOE reinterpreted longstanding metrics regarding federal student aid, effectively barring students from attending for-profit institutions that did not meet new, arbitrary standards. Click here for a more thorough explanation.
Today’s hearing may have been worthwhile if DOE Secretary Arne Duncan had showed up, as he was scheduled to. While the gainful employment rule is controversial in itself, the circumstances from which it originated are, as Sen. Tom Coburn (R-Okla.) said, “criminal.” There is ample evidence to suggest that DOE officials and non-profit education groups worked with Wall Street traders to write the gainful employment rule. This is problematic because traders—using what should have been proprietary information—short sold for-profit colleges’ stocks once they knew the gainful employment rule was going to be introduced. It is due to the potentially dubious communication between DOE officials and financial executives that Americans for Tax Reform President Grover Norquist urged the Securities and Exchange Commission Director of Enforcement Robert Khuzami:
“to investigate the Department of Education and the rulemaking process surrounding the “gainful employment” regulation. Such an investigation is necessary to determine whether or not Department of Education officials were complicit with short-sellers during the drafting of the gainful employment rule.”
Arne Duncan has been surprisingly silent about the events and circumstances leading up to promulgation of the gainful employment rule. Today’s hearing would have been as good a forum as any for Secretary Duncan to clear the air surrounding the controversial decision. The Secretary’s absence was a missed opportunity and certainly raised some eyebrows from Republican senators who were looking forward to engaging the man charged with running the Department of Education. Until this happens, a dark cloud will remain over the Department of Education and its controversial rulemaking.
Private Higher Education Crippled by Gainful Employment Rule
The Office of Management and Budget (OMB) today published the now infamous “gainful employment” rule, written by the Department of Education. This new rule, which emerged amidst a cloud of scandal and controversy, places incredible and unfair burdens on the nation’s bustling for-profit higher education sector.
It requires that for-profit schools meet at least one of three criteria for their students to qualify for federal aid: at least 35% of graduates must actively be paying down their loans; graduates must spend less than 30% of their discretionary income on paying off loans; finally, graduates must spend 12% or less of their total income on loan payments. Fail to pass one of these tests three times in four years, and the school must close its doors for good.
Enrollment in for-profit education institutions has skyrocketed nearly 418% since 2000, and for good reason. Tuition averages about $10,000 per year less than private not-for-profit schools. These innovative schools consistently lead the way in online education and cater to the needs of local employment markets in ways that traditional schools do not. Notably, and most importantly, these institutions serve a distinct demographic. Minority students constitute 45% of for-profit colleges’ total enrollment compared to 33% and 27% for public and private non-profit colleges, respectively.
Eliminating choice and competition is hardly an effective way to ensure opportunity for so many that are traditionally shutout of higher education. Colleges enrolling mostly minority students are more likely to demonstrate loan re-payment rates in the new rule’s restricted zone, and would likely be forced to close their doors. Realizing the implications of the new gainful employment rule, 289 members of the House of Representatives, including 58 Democrats, voted in February to block funding for its enforcement. The Senate, however, rejected the plan.
Further muddying the water, the circumstances surrounding the rulemaking are shrouded in controversy. Back in February, Citizens for Responsibility and Ethics in Washington (CREW) asked the Securities and Exchange Commission (SEC) to investigate a known Wall Street short-seller, Steve Eisman. Eisman testified before the Senate HELP committee arguing for implementation of the gainful employment rule despite having no expertise in education policy. Even more problematic, a FOIA by CREW revealed that Eisman was in close contact with Education officials and may have even helped write the new gainful employment rule.
This is especially troubling since Eisman and other financial firms bet that for-profit schools—publically traded companies—stock price would plummet, a practice called short-selling. DOE is yet to sufficiently address the elephant in the room—why were they working so closely with Eisman and others who stood to profit from the gainful employment rulemaking.
On April 28, DOE’s Office of Inspector General launched a probe into the possible influence of Wall Street short sellers on the rule. Despite this probe and serious questions left unanswered the Office of Management and Budget codified and published the gainful employment rule. The haste at which this rule was rammed through is disconcerting, especially given the warranted allegations from Senators, Representatives, and non-partisan outside groups. Until the dust settles and Americans concerns are alleviated, DOE should suspend implementation of the gainful employment rule. Anything else would be imprudent.
Originally published at WorkerFreedom.org
Government Employees Overpaid by $468 Billion Each Year
Government employee compensation is low hanging fruit for politicians looking to rein in government’s overspending problem. Unaffected by market forces, government agencies need not abide by traditional business practices. This problematic arrangement manifests itself when one compares state and federal worker compensation to similar private sector compensation.
State and local employee overpayment 
State and local government employee compensation
Comparable private sector Compensation
Amount state and local gov employees are overpaid
Number of state employees
Federal employee overpayment
Federal employee compensation
Private sector employee compensation
Amount federal employees are overpaid
Number of federal employees sans postal
When controlling for factors such as education, age, experience, intangible benefits (job security) federal premium is: 
- Federal employees' hourly wages are 22% more than workers in the private sector
- Aligning federal workers' compensation with market rates would save taxpayers $47 billion a year
- When combining wages and total benefits, federal employees earn 30% to 40% more than private-sector workers
- Full-time federal employees can take 13 paid sick days a year along with all 10 days of national holidays
- The average federal civilian employee earns on average $32,115 a year in non-cash compensation compared to a private sector employee who earns three times less, $9,882 annually
- Federal employees receive 22% more in employer payments toward their health care than their private sector counterparts.